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[Evil Calvin]

The basics of finance need to be taught in middle schools or even younger. Pretty ridiculous that, at least the ones I went to, there were basically no instruction on different ways to save, grow, conserve money.

You only live once though and there's no afterlife. "OOOOooooh heaven is a place on Earth!" Spend that cash how you want, G.

I remember getting my first credit card in college. They had a table set up in the commons. Sorry but one should NOT have a credit card until they are out of college. Big mistake that was when I got it.

 

[Maiden Voyage]

Personal finance should be mandatory for all teenagers and adults.

 

[fran.fernandez]

100k is a lot and the most difficult to achieve, most people who get near 100k after years of savings start spending it (almost there feeling).

after passing the 100k it get easier to achieve 200k and so on .

Idk in US but in japan, if you make 100k, that means 65k (35 is tax).
5.400 us monthly. More than 50% would be in life style include rent. So you would be saving around 2000k monthly or little more. It would take 4-5 years to get 100k, only if you don’t travel, start buying stuff, have kids lol

 

[GMAK2442]

I think you need a reserve and than it could be all fine. Note that living day after day require a philosophy in my theories.

 

[Tschumi]

Wage rises haven't kept up with rising costs for decades now, I'm not saying i know the truth, and I'm not defending anyone who is legitimately full of shit, but i sense there's a decent chance 100k isn't worth quite as much now as it was in the 90s or whathaveyou

 

[Platinumstorm]

I fit into this group.

My mortgage +$255 HOA for my <2000sqft townhome was over $2500 prior to refinancing, now at $2300ish. Rent prior to this was $1800 per month, I like to call it $1900 because of the bullshit fees associated with apartments. Interest payment is $1000 a month after refi which feels like an infinitely better value. My townhome value has gone up $99,000 since I purchased it not even 18 months ago. I mention this latter part only because it's an impossibility to get ahead of something like a $99,000 price increase. In a typical year, the townhome probably would have gone up $50k /year based on regional price increases, which would be really difficult for the majority of households to do.

When I was in my apartment I would put away maybe $10k per year in my checking account after all was said and done. I couldn't max my 401k, and I actually purchased my home by not contributing to my 401k in all of 2019 [which was an awesome decision]. When I purchased my home, my lease agreement, which I agreed to and take responsibility for, required 60 days advance notice AND a $2500 break lease fee. This meant that last year I was losing money, and I calculated that I would end up with about $6k left to my name, counting my scheduled pay raise. Of course, my pay raise got frozen, I had surprise appliances die right off the bat, and I ended up with $2500 left in my account at one point last year. Covid relief, hmm? Without stonkz go up, I would be really working to replete emergency funds right now, instead they're just a little shy.

I ski, mtb, and hike. I plan to spend about 3k on these three activities combined [my ski gear has been falling apart for 3 years and I've been pushing it off to save for home], plus an extra 2-5k in gasoline this year for those things combined. My 20 year old vehicle is on its last legs. It has been great and reliable, but it keeps giving me hints that it is done.

If I got injured doing any of my activities, or more likely, driving, I would have, in the past, really felt the pressure to stay in my apartment from financial concerns. I don't even have student loans, and I still felt the pressure of all of this.

Now, I have the problem where I'm probably trapped in a tier above starter home townhome; thankfully in an incredible neighborhood, but what happens if I get married and kiddos happen? My neighbors homes are pushing 850k-1.1m. I can't roll with that.

 

[godhandiscen]

If I got injured doing any of my activities, or more likely, driving, I would have, in the past, really felt the pressure to stay in my apartment from financial concerns. I don't even have student loans, and I still felt the pressure of all of this.

Now, I have the problem where I'm probably trapped in a tier above starter home townhome; thankfully in an incredible neighborhood, but what happens if I get married and kiddos happen? My neighbors homes are pushing 850k-1.1m. I can't roll with that.

You are doing well, but I wouldn’t think of “what if I get injured performing extreme sports” or ”what if i get married and have kids” as some acts of god you have no control over. Just be wise and reduce the risk of your activities and talk to your gf/fiance to delay moving the relationship further until you have built a safety net.

 

[Platinumstorm]

You are doing well, but I wouldn’t think of “what if I get injured performing extreme sports” or ”what if i get married and have kids” as some acts of god you have no control over. Just be wise and reduce the risk of your activities and talk to your gf/fiance to delay moving the relationship further until you have built a safety net.

I certainly don't think that I'm doing unwell, but I am frustrated at how difficult it is for people to really secure wealth for themselves, and I wish it wasn't that way.

My activities aren't going to be changing. I certainly don't take horribly unnecessary risks, although all of those activities are risks, the only one I have ever been injured in is hiking; repeatedly. They're the entire reason I live here. =)

 

[lefty1117]

If you're the earner in a family of 4 or 5, $100k is not a lot, at least not in America. As a single person, that should be more than enough to live a comfortable lifestyle. People need to understand what their means are and live within them. Easier said than done, we've all had to deal with debt.

 

[HoodWinked]

How much of this is because of social media that has put the keeping up with the Jones' but supercharged on crack.

Car payments are what kill people not only are you draining your funds but the thing bleeds value.

Also it's about being conscious about your finances. Someone I know had student loans at 5% and refinanced his home at 2.3% so he took a cash out and paid off his student loans so now all his repayments are at 2.3%.

 

[StreetsofBeige]

I fit into this group.

My mortgage +$255 HOA for my <2000sqft townhome was over $2500 prior to refinancing, now at $2300ish. Rent prior to this was $1800 per month, I like to call it $1900 because of the bullshit fees associated with apartments. Interest payment is $1000 a month after refi which feels like an infinitely better value. My townhome value has gone up $99,000 since I purchased it not even 18 months ago. I mention this latter part only because it's an impossibility to get ahead of something like a $99,000 price increase. In a typical year, the townhome probably would have gone up $50k /year based on regional price increases, which would be really difficult for the majority of households to do.

When I was in my apartment I would put away maybe $10k per year in my checking account after all was said and done. I couldn't max my 401k, and I actually purchased my home by not contributing to my 401k in all of 2019 [which was an awesome decision]. When I purchased my home, my lease agreement, which I agreed to and take responsibility for, required 60 days advance notice AND a $2500 break lease fee. This meant that last year I was losing money, and I calculated that I would end up with about $6k left to my name, counting my scheduled pay raise. Of course, my pay raise got frozen, I had surprise appliances die right off the bat, and I ended up with $2500 left in my account at one point last year. Covid relief, hmm? Without stonkz go up, I would be really working to replete emergency funds right now, instead they're just a little shy.

I ski, mtb, and hike. I plan to spend about 3k on these three activities combined [my ski gear has been falling apart for 3 years and I've been pushing it off to save for home], plus an extra 2-5k in gasoline this year for those things combined. My 20 year old vehicle is on its last legs. It has been great and reliable, but it keeps giving me hints that it is done.

If I got injured doing any of my activities, or more likely, driving, I would have, in the past, really felt the pressure to stay in my apartment from financial concerns. I don't even have student loans, and I still felt the pressure of all of this.

Now, I have the problem where I'm probably trapped in a tier above starter home townhome; thankfully in an incredible neighborhood, but what happens if I get married and kiddos happen? My neighbors homes are pushing 850k-1.1m. I can't roll with that.

Assuming you can float it, you should be fine. But it sounds like you maxed out your income/expenses and will have to stick with your home for a while unless you move to a place with much cheaper homes where you still net gain after closing costs.

With a mortgage of $2300-ish, your mortgage is probably around $500,000.

What you could had done is take smaller steps like a cheaper condo or a cheaper starter townhouse (as you said), but you bought a mid tier townhouse.

 

[OmegaSupreme]

I hate millennials. I'll probably hate gen z even more. Get me off this rock. I don't want to live on this planet anymore.

 

[Porcile]

Probably spending thousands a month on shit like Pokemon cards and calling it an "entertainment" expense.

 

[Hydelol]

I overheard a conversation yesterday from a girl in her early twenties about she knows a lot of people in her age that are in debt due to their mobile phone contracts. In germany you must be really dumb to be in debt at a young age. But due to your mobile phone? Lol give me a break.

 

[DeepBreath87]

People have zero concept of money. In the US, kids often get over leveraged before they reach legal drinking age due to college and credit cards. The idea that the US government would dole out +$120,000 loans to people to become school teachers is asinine. How are they ever going to pay that back starting out with a salary of around $50k unless they live at home with their parents until they’re 30?

You would think the government would require the borrower to pursue a career commensurate with the loans they’re receiving. But no. They allow naive almost children to saddle themselves with lifelong debt that can never been jettisoned. I realize people and their parents should know better. However, they are sold lies about college being the gateway to the upper middle class when often times it’s actually the road to indentured servitude.

 

[Garibaldi]

I took up YNAB a good while back (near on a decade or so). I was a bit shitty with my money, getting promotions and instantly increasing my lifestyle to match. Probably why the ex at the time broke up with me. I was still throwing loads into a pension and such but everything was disposable in my eyes. YNAB standalone was available in a steam sale. Picked it up after having to move back in with the parents as I couldn't afford a place (due to the lack of personal savings). It was life changing. Everyone should be taught how to budget effectively in school as well as the consequences of interest and paying off the minimum every month.

I believe the software is now sub based (I still just use the classic version I bought years ago), but I thoroughly recommend everyone looks into something similar and educates themselves.

 

[Tg89]

I remember getting my first credit card in college. They had a table set up in the commons. Sorry but one should NOT have a credit card until they are out of college. Big mistake that was when I got it.

Eh, in today's world it's pretty inconvenient to not have a credit card. Just teaching some basic financial skills is enough to rectify this problem...I mean at that age the only rule you really need to follow is don't put it on your credit card if you don't have the cash available to pay it off before interest hits.

I think the biggest issue younger people have with credit cards is the concept of the "minimum payment". Outside of emergencies there really should never be a situation where you don't pay your credit card off entirely every month.

 

[QuantumZebra]

It sounds insane. If people struggle to get by on 100k then it's a failed state. Do all the homes in California have sweet nectar coming out of the taps (faucet) rather than water?

How do people in low paid jobs, such as retail or fast food etc, survive? Do they pay a monthly rent to sleep on the golden paved streets?

There's literally software developers sleeping in their cars in San Fran (read up on it, it's insane). Totally unsustainable and almost inhumane.

 

[BadBurger]

There's literally software developers sleeping in their cars in San Fran (read up on it, it's insane). Totally unsustainable and almost inhumane.

It's crazy to me, as a tech worker, the draw Silicon Valley (and places in the Pacific Northwest) still has for tech workers. They could move to numerous places in Texas, Virginia, Research Triangle, even some places blossoming in the midwest, hell even south Florida, and earn the same or more money and live large like they should with their talent. Instead they want to be seen as a Valley tech worker so they end up slaving away for ten+ years before they burn out and have nothing to show for it.

 

[TrueLegend]

Skill is needed to earn money. Education is needed to know how to spend money. And education systems all around the world suck at educating people, all they do is provide knowledge, which nowadays one can get by the press of a button on their smartphone. The result, THIS MESS.

 

[AJUMP23]

I fit into this group.

My mortgage +$255 HOA for my <2000sqft townhome was over $2500 prior to refinancing, now at $2300ish. Rent prior to this was $1800 per month, I like to call it $1900 because of the bullshit fees associated with apartments. Interest payment is $1000 a month after refi which feels like an infinitely better value. My townhome value has gone up $99,000 since I purchased it not even 18 months ago. I mention this latter part only because it's an impossibility to get ahead of something like a $99,000 price increase. In a typical year, the townhome probably would have gone up $50k /year based on regional price increases, which would be really difficult for the majority of households to do.

I think a lot of this is location. I have a large house in a rural location and pay less per month on the payment. I also put down extra on principle. If you want a house I would recommend looking out in the suburbs of where you live and finding something within an affordable price range. Your loan interest seems high, and I wonder if you have some credit issues in your history or just have an expensive townhome. If you have to do your job in a metropolitan area than I understand the expenses. If you can move to a lower cost location and do the same job, I would recommend that.

Also always invest into your retirement, especially if your company has matching funds.

For a car purchase you should be setting aside money every week to purchase one. and when you do purchase one, don't buy new.

 

[Tg89]

It's crazy to me, as a tech worker, the draw Silicon Valley (and places in the Pacific Northwest) still has for tech workers. They could move to numerous places in Texas, Virginia, Research Triangle, even some places blossoming in the midwest, hell even south Florida, and earn the same or more money and live large like they should with their talent. Instead they want to be seen as a Valley tech worker so they end up slaving away for ten+ years before they burn out and have nothing to show for it.

Yeah, the root problem is really just people defining their lives/worth by the prestige of their job. It happens on a smaller scale in other areas too, the idea of the "dream job".

Lot's of things that led to that. But the amount of people today who take pride in working 60 hour weeks, or constantly being connected to their email, etc. is kinda pathetic. A job is a means to an end, work your 35 hours a week (ideally less) and go do something worthwhile.

 

[AJUMP23]

This news sucks though:

Home prices in April jumped 14.6 percent compared with a year ago, up from a 13.3 percent rise in March, the S&P CoreLogic Case-Shiller National Home Price Index showed Tuesday.

This is the fastest annual pace on record, beating the housing bubble high of 14.3 percent in 2005. On a monthly and seasonally adjusted basis, home prices nationally rose 1.6 percent, also an all-time high.

 

[crazepharmacist]

The basics of finance need to be taught in middle schools or even younger. Pretty ridiculous that, at least the ones I went to, there were basically no instruction on different ways to save, grow, conserve money.

You only live once though and there's no afterlife. "OOOOooooh heaven is a place on Earth!" Spend that cash how you want, G.

Is it beneficial for the economy if more people were savers vs spenders? If everyone saved, no one would buy the latest Iphone and my AAPL shares would lose value.

 

[Raven117]

I remember getting my first credit card in college. They had a table set up in the commons. Sorry but one should NOT have a credit card until they are out of college. Big mistake that was when I got it.

The credit card companies have been doing this for decades. They know exactly what they are doing.

 

[crazepharmacist]

Near impossible where I live unless you want to be a debt slave for 30 years. Also a huge gamble considering how insane house prices are. The probability of a price crash in the near future is rather high. (Reminder = if the price crashes, your mortgage goes to shit and you lose your house unless you have a couple hundred grand on the side)

t. couple with "decent jobs" where we both combined have like 60 grand a year after taxes while a "decent house" starts at 500k

Can you explain that? If the housing market crashes, why would your mortgage go to shit? Isn't a mortgage a locked payment plan for 10-30 years? IE the same monthly payment regardless of home equity?

 

[OmegaSupreme]

I blame the smartphone culture. It's more important to have the newest gadget than to have any savings for these kids. They would rather eat out than cook. They would rather go on expensive vacations and live their "best life" Fuck the future we are all going to die anyway.

 

[Tg89]

Can you explain that? If the housing market crashes, why would your mortgage go to shit? Isn't a mortgage a locked payment plan for 10-30 years? IE the same monthly payment regardless of home equity?

Most mortgage terms are only ~5 years, where I'm at at least.

The payments are based on paying it off over a longer period of time, but every 5 years you have to renew and get a new rate etc. In the event that the market really crashed, that could result in you being pretty far underwater.

For example, you buy a house for 750k, with a 25 year mortgage, 5 year term. Market crashes on year 4 but doesn't recover in time for your renewal, so when you go to renew you have say 600k principal left on your mortgage, but the house is only worth 400k now. The bank could in theory choose not to renew (because if you fail to pay they can't repossess the asset to recover). In this situation your only option would be to pay the difference up front (in this case 200k).


It's the same reason putting an offer in with no conditions can be dangerous. If you offer 800k on a house but the bank only assesses the property as worth 700k, they're only going to loan you that 700k, meaning you'll have to come up with the difference.

 

[evolvaer]

This thread is "Lets shit on younger generation for not raising them right, and also we broke the world but fuck young people for growing up in said world".

 

[Tg89]

This thread is "Lets shit on younger generation for not raising them right, and also we broke the world but fuck young people for growing up in said world".

Eh I think to be fair a lot of this is just the world changing that the older generation didn't necessarily anticipate. Yeah, they could have done better teaching people finances but a lot of things changed and they were teaching based on what they knew.

It's the same reason the older generation has the bootstraps mentality. For most of them, as long as you were willing to work hard you'd be mostly fine. Not necessarily the case anymore. There was also the "go to university at all costs" attitude. Which in theory sounded nice, but in reality just resulted in a flooded market of people with degrees that weren't worth the paper they were printed on. Now you've unnecessarily raised the bar of entry for practically every professional position and the only real beneficiary are the schools and the people collecting the loans.

Then you have the consumerism problem. The easy thing to say is "well my generation didn't buy an iphone every year" and yeah, that's part of it. But your generation also wasn't constantly bombarded by some of the most sophisticated marketing strategies we've seen and extremely efficient vehicles to deliver them. Not to mention the social media lie, constantly seeing the best parts of peoples lives, people you might not even know, etc. Keeping up with the jones' was always a thing, but it used to be that the jones was your coworker, or your neighbour...people in a relatively similar economic situation to you. Now the jones could be some rich kid half way across the world that you happen to follow on instagram.

Lots of factors. Cherry on top is the legitimate rise in cost of living relative to wages.

 

[kuncol02]

So you think $10 coffee is the problem?

You think it's not? If you buy it everyday then you are spending 3% of everything you earn on fucking coffee.

 

[jshackles]

Most mortgage terms are only ~5 years, where I'm at at least.

The payments are based on paying it off over a longer period of time, but every 5 years you have to renew and get a new rate etc. In the event that the market really crashed, that could result in you being pretty far underwater.

For example, you buy a house for 750k, with a 25 year mortgage, 5 year term. Market crashes on year 4 but doesn't recover in time for your renewal, so when you go to renew you have say 600k principal left on your mortgage, but the house is only worth 400k now. The bank could in theory choose not to renew (because if you fail to pay they can't repossess the asset to recover). In this situation your only option would be to pay the difference up front (in this case 200k).


It's the same reason putting an offer in with no conditions can be dangerous. If you offer 800k on a house but the bank only assesses the property as worth 700k, they're only going to loan you that 700k, meaning you'll have to come up with the difference.

I don't know where you're from, but that sounds awful.

As crazepharmacist (who has an awesome avatar btw) said, here in America most mortgages have a fixed interest rate. You lock in the payment and term (typically 30 years) and you can literally pay that amount every month for the next 30 years and your mortgage will go away. It never changes. It's how most people I know of hedge their wages against long term inflation.

EDIT: the only time most people in America have to deal with something like this is if their house value goes down significantly and they decide to move / sell. It's where the term "upside down on your mortgage" comes from, but instead of having to shell over a ton of cash to the bank to keep living where you're at, it typically just means... you can't move.

 

[AJUMP23]

Is it beneficial for the economy if more people were savers vs spenders? If everyone saved, no one would buy the latest Iphone and my AAPL shares would lose value.

This is the broken window fallacy. We say look at all this spending it helps the economy. This window is broken that is actually good for the economy because some one now has to buy glass and replace it. What is not talked about is if the window wasn't broken that "glass" money could have been used for multiple other investments. Saving money helps the economy, it allows banks to make loans, and builds equity and wealth for individuals which helps families move out of poverty into economic stability.

I would recommend this book for you. Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics: Hazlitt, Henry: 9780517548233: Amazon.com: Books

 

[crazepharmacist]

Most mortgage terms are only ~5 years, where I'm at at least.

The payments are based on paying it off over a longer period of time, but every 5 years you have to renew and get a new rate etc. In the event that the market really crashed, that could result in you being pretty far underwater.

For example, you buy a house for 750k, with a 25 year mortgage, 5 year term. Market crashes on year 4 but doesn't recover in time for your renewal, so when you go to renew you have say 600k principal left on your mortgage, but the house is only worth 400k now. The bank could in theory choose not to renew (because if you fail to pay they can't repossess the asset to recover). In this situation your only option would be to pay the difference up front (in this case 200k).


It's the same reason putting an offer in with no conditions can be dangerous. If you offer 800k on a house but the bank only assesses the property as worth 700k, they're only going to loan you that 700k, meaning you'll have to come up with the difference.

I've never heard of this. Is this a thing in America? I've only heard of Mortgages that are fixed. Same payment for 30 years or however long.

 

[Tg89]

I don't know where you're from, but that sounds awful.

As crazepharmacist (who has an awesome avatar btw) said, here in America most mortgages have a fixed interest rate. You lock in the payment and term (typically 30 years) and you can literally pay that amount every month for the next 30 years and your mortgage will go away. It never changes. It's how most people I know of hedge their wages against long term inflation.

Canada. Yeah, on paper it sounds not ideal. In practice I think there's a bunch of other factors/laws that make it work out pretty well. I believe it's the main reason 2008 didn't hit us nearly as hard. Not an expert on that though so don't quote me.

This article seems to summarize it a bit:

How Canada is not like the United States: Home mortgage edition

Those of us who write about the housing market and the virtues of the 30-year fixed home loan -- as we did Wednesday -- can calibrate our watches by how long it takes a reader to respond as follows: "Hey, Canada doesn't have 30-year fixed mortgages, and their housing market's doing just fine!

www.latimes.com

 

[jshackles]

Canada. Yeah, on paper it sounds not ideal. In practice I think there's a bunch of other factors/laws that make it work out pretty well. I believe it's the main reason 2008 didn't hit us nearly as hard. Not an expert on that though so don't quote me.

This article seems to summarize it a bit:

How Canada is not like the United States: Home mortgage edition

Those of us who write about the housing market and the virtues of the 30-year fixed home loan -- as we did Wednesday -- can calibrate our watches by how long it takes a reader to respond as follows: "Hey, Canada doesn't have 30-year fixed mortgages, and their housing market's doing just fine!

www.latimes.com

This is fascinating to me, especially this part:

But Canadian mortgages are also portable -- if you move before the five-year term is up you can apply your old mortgage to your new home. (If it’s a more expensive home, you take out a new loan for the excess.)

That concept feels absolutely alien to me.

 

[StreetsofBeige]

Canada. Yeah, on paper it sounds not ideal. In practice I think there's a bunch of other factors/laws that make it work out pretty well. I believe it's the main reason 2008 didn't hit us nearly as hard. Not an expert on that though so don't quote me.

This article seems to summarize it a bit:

How Canada is not like the United States: Home mortgage edition

Those of us who write about the housing market and the virtues of the 30-year fixed home loan -- as we did Wednesday -- can calibrate our watches by how long it takes a reader to respond as follows: "Hey, Canada doesn't have 30-year fixed mortgages, and their housing market's doing just fine!

www.latimes.com

I cant read the article since it's behind a login wall.

Canada didnt get hit really at all, since the banks are stronger (among the most stable in the world), we dont have as many ghetto people here living pay cheque to pay cheque, and the US got hit hard in tourist states where people have second homes. Thats why places like Vegas and Florida and Arizona had tons of dirt cheap foreclosed homes.

I'm going assume since the big 5-6 banks here all follow each other with basically the same rates and financial strength, they dont do crazy deals US banks offer to people. Dont get me wrong, I remember the Canadian banks report bad profits (or maybe even a loss during 2008 or 2009), but they recovered fast and back to making billions of profit. I think TD got hit hard as they had a lot of US exposure.

When it happened, some of us at the office were thinking about chipping in $20k each and buying a place in Phoenix for less than you can buy the shittiest apartment here in Toronto.

 

[Tg89]

I cant read the article since it's behind a login wall.

Canada didnt get hit really at all, since the banks are stronger (among the most stable in the world), we dont have as many ghetto people here living pay cheque to pay cheque, and the US got hit hard in tourist states where people have second homes. Thats why places like Vegas and Florida and Arizona had tons of dirt cheap foreclosed homes.

I'm going assume since the big 5-6 banks here all follow each other with basically the same rates and financial strength, they dont do crazy deals US banks offer to people. Dont get me wrong, I remember the Canadian banks report bad profits (or maybe even a loss during 2008 or 2009), but they recovered fast and back to making billions of profit. I think TD got hit hard as they had a lot of US exposure.

When it happened, some of us at the office were thinking about chipping in $20k each and buying a place in Phoenix for less than you can buy the shittiest apartment here in Toronto.

Weird, didn't have to login here. And yeah article kinda touches on what you're getting at:

More important, observed Canadian economists Arthur Donner and Douglas Peters in a 2012 report for the Pew Charitable Trusts, the short term of Canadian mortgages allowed them to be funded from local short-term bank deposits at retail bank branches. The mortgage-lending system in Canada to this day resembles the American banking system up to the 1970s, when deregulation took hold and placed fancy, risky and careless lending at the center of the business model. (By the way, mortgage interest isn’t tax-deductible in Canada, so there’s no incentive to over-borrow.)



That may be the single most important factor distinguishing the U.S. and Canadian systems. Canadian banks haven’t had a free ride in regulation like their American cousins. Mortgage terms are very closely supervised, as are the safety and soundness of lending banks. The Canadian system requires, and incentivizes, banks not to sell their loans but keep them on their balance sheets. That factor alone discouraged Canadian banks from offering the kind of wild, who-gives-a-damn mortgage structures that infected the U.S. It also prevented the erosion of underwriting standards seen here.




Canadian banks didn’t have access to the private-label securitization that created that welter of toxic mortgage securities in the U.S., but they didn’t need it. Securitization reached 40% of the market in the U.S. by 2007. In Canada, according to David Min of the Center for American Progress, it never exceeded 3%.



The idea that the U.S. government meddles in the mortgage market more than those free-market paragons in Canada is dead wrong. The truth is just the opposite.




Yes, the U.S. backs the conventional 30-year fixed loan through Fannie Mae and Freddie Mac, its government sponsored home loan firms. But the government-owned Canada Mortgage and Housing Corp, has an even greater influence over that country’s market. It accounts for some 70% of all mortgage insurance, which is required on all loans covering less than 80% of the home value and guarantees the entire mortgage.



The Canadian regulatory system simply didn’t allow the development of exotic mortgages designed to create loans for sale that had to be dressed up by fraudulent appraisals and flagrantly bogus credit ratings.

 

[StreetsofBeige]

This is fascinating to me, especially this part:



That concept feels absolutely alien to me.

In Canada, the key things are (which Tg89 also suggested):

1. Choose fixed rate or variable rate. I always choose variable as it's better than fixed most of the time. Fixed is a flat rate for xxx years. Variable is a moving rate based on mortgage prime +/- a %. I think it's always a negative. Mine if -0.70%. My place is 2.40% prime, so less 0.70% = 1.70%. Fixed has the benefit of predictability. Variable is almost always better, but some people lose sleep in case rates go up. But right now, you can lock in a fixed at under 2%. Variables cant be that much better, so if rates go up, a fixed deal should be better. But who knows. It's all about timing and luck

2. Choose term. 1 yr, 3, yr, 5 yr. Maye other options. I always do 5 yr

3. Choose amortization period. I think I always do 25 years. I think that is the standard choice. But it can be adjusted. Not sure if there are 30 year deals.

4. Portable (as Tg89 said). When the term is up, its time to do a new deal. Most of the time, it seems to convert at the same thing. I lived in 3 places one time and had the same -0.75% variable rate. But when I moved to my current place (different bank), it was offered at -0.70%. I think this is pure luck though as variable rates adjust based on the prime rate which is based on Bank of Canada rate (or some shit like that)

5. I dont know how the US works, but to get a mortgage you pay insurance to CMHC (I think). The more money you pit down the less of a fee you get dinged. If you put down 20% your fee is $0

6. In the US I think mortgage interest can be deducted as an income tax perk. Canada you arent allowed that. Most countries dont. If the US government really wants to make billions of taxes back, they could axe this American perk

 

[StreetsofBeige]

Weird, didn't have to login here. And yeah article kinda touches on what you're getting at:

Thanks. My mistake. It was an ad blocker pop up. I could read it after disabling.

 

[Tg89]

In Canada, the key things are (which Tg89 also suggested):

1. Choose fixed rate or variable rate. I always choose variable as it's better than fixed most of the time. Fixed is a flat rate for xxx years. Variable is a moving rate based on mortgage prime +/- a %. I think it's always a negative. Mine if -0.70%. My place is 2.40% prime, so less 0.70% = 1.70%. Fixed has the benefit of predictability. Variable is almost always better, but some people lose sleep in case rates go up. But right now, you can lock in a fixed at under 2%. Variables cant be that much better, so if rates go up, a fixed deal should be better. But who knows. It's all about timing and luck

2. Choose term. 1 yr, 3, yr, 5 yr. Maye other options. I always do 5 yr

3. Choose amortization period. I think I always do 25 years. I think that is the standard choice. But it can be adjusted. Not sure if there are 30 year deals.

4. Portable (as Tg89 said). When the term is up, its time to do a new deal. Most of the time, it seems to convert at the same thing. I lived in 3 places one time and had the same -0.75% variable rate. But when I moved to my current place (different bank), it was offered at -0.70%. I think this is pure luck though as variable rates adjust based on the prime rate which is based on Bank of Canada rate (or some shit like that).

Yep. I think they phased 30 years out? I know they're definitely not available for anything CMHC insured.

I think a lot of banks also offer you the option of reupping your amortization at the end of your term. So if you have a 5 year term on a 25 year amortization, when it comes time for renewal you can either continue with another 5 year term on your current amortization schedule, or bring that back up to 25 years (lower monthly payments but more interest on the long term).

Rates up here have plummeted recently though, like you said. Was able to lock in myself at 1.6 recently...otherwise yeah, variable seems to be the play most of the time assuming you have a reasonable savings.

 

[StreetsofBeige]

Yep. I think they phased 30 years out? I know they're definitely not available for anything CMHC insured.

I think a lot of banks also offer you the option of reupping your amortization at the end of your term. So if you have a 5 year term on a 25 year amortization, when it comes time for renewal you can either continue with another 5 year term on your current amortization schedule, or bring that back up to 25 years (lower monthly payments but more interest on the long term).

Rates up here have plummeted recently though, like you said. Was able to lock in myself at 1.6 recently...otherwise yeah, variable seems to be the play most of the time assuming you have a reasonable savings.

I cant believe the rates are this low. My mortgage is up for renewal next summer. Hoping rates are still this low because I'm locking in a fixed this time. Hoping 1.6% is still around a year from now.

 

[FunkMiller]

Eh...

That's still a bloody decent wage, even if you live in the most expensive metropolitan areas in the world. I'm in north west London (NW1) , where all the toilets are gold plated and anyone who earns under 50k a year is beaten with a stick. 70k (around 100k US) will see you good even here, if you're not a complete dickhead with your finances. You ain't gonna be holding extravagant parties, but you're not going to be living paycheck to paycheck either. Maybe things are different in the states, considering how much health insurance is on top of everything else?

 

[Tg89]

I cant believe the rates are this low. My mortgage is up for renewal next summer. Hoping rates are still this low because I'm locking in a fixed this time. Hoping 1.6% is still around a year from now.

Hope so. Keeps the house value high for sure haha.

I can't see them going up too much. Every day I read some article about the next rate hike but it never happens...even if it does I think it'll be marginal. Too much at stake and anything significant would be suicide for whichever party is in charge at the time it happens.

 

[QuantumZebra]

It's crazy to me, as a tech worker, the draw Silicon Valley (and places in the Pacific Northwest) still has for tech workers. They could move to numerous places in Texas, Virginia, Research Triangle, even some places blossoming in the midwest, hell even south Florida, and earn the same or more money and live large like they should with their talent. Instead they want to be seen as a Valley tech worker so they end up slaving away for ten+ years before they burn out and have nothing to show for it.

Yeah I agree. I am seeing a ton of folks moving to GA from Cali (probably part of the reason GA turned blue in the past election tbh).

Some folks are realizing that sleeping in their car when they make $60k/yr is insane. Others are insane.

Eh...

That's still a bloody decent wage, even if you live in the most expensive metropolitan areas in the world. I'm in north west London (NW1) , where all the toilets are gold plated and anyone who earns under 50k a year is beaten with a stick. 70k (around 100k US) will see you good even here, if you're not a complete dickhead with your finances. You ain't gonna be holding extravagant parties, but you're not going to be living paycheck to paycheck either. Maybe things are different in the states, considering how much health insurance is on top of everything else?

I can say that to cover a family of 5 it costs me $1000/month.

 

[StreetsofBeige]

Hope so. Keeps the house value high for sure haha.

I can't see them going up too much. Every day I read some article about the next rate hike but it never happens...even if it does I think it'll be marginal. Too much at stake and anything significant would be suicide for whichever party is in charge at the time it happens.

It was a flat line lull for a while after 2017 foreign investor tax and stress test, plus covid, but since beginning of the year it's bidding war mania again. Stress test #2 did nothing so far.

My place has gone up $100-150k already going by resale values past few months of homes in the neighbourhood. lol.

My good buddy realtor said some places he showed people had 30 offers. Wild. 30 offers for a townhouse. Keep it up people!

For those of you who dont know, Canada implemented a protective measure of people getting grilled with mortgage qualifications at 5.29% for sake of approval, even though your real offer might be 2% from a bank.

 

[jshackles]

Eh...

That's still a bloody decent wage, even if you live in the most expensive metropolitan areas in the world. I'm in north west London (NW1) , where all the toilets are gold plated and anyone who earns under 50k a year is beaten with a stick. 70k (around 100k US) will see you good even here, if you're not a complete dickhead with your finances. You ain't gonna be holding extravagant parties, but you're not going to be living paycheck to paycheck either. Maybe things are different in the states, considering how much health insurance is on top of everything else?

Health costs and health insurance is definitely a huge drag here. You could have $100,000 in savings and it could be gone in an instant. Even with health insurance.

I had a heart attack in Jan of 2019. My wife drove me to the hospital (so I didn't have ambulance fees) but the emergency treatment + follow up visits still set me back over $10k out of pocket even though I have health insurance. And I feel like I got the absolute bare minimum in coverage - basically they checked to make sure I didn't have any long term damage and that I wasn't in immediate danger of dying, and I was discharged. The follow up visits were equally as brisk, they didn't even do a heart function test or really anything outside of a chest xray thing and took my vitals. No long term care or support, just a "hope we don't have to see you again!". For a long time while I was paying that debt off, I just kept thinking I would have been better off staying at home that night and weathering the storm. If there's a next time, I probably will.

 

[EverydayBeast]

Article is making paying by paycheck to paycheck like it’s a big deal, blah blah blah same thing people have been doing for centuries.

 

[StreetsofBeige]

Health costs and health insurance is definitely a huge drag here. You could have $100,000 in savings and it could be gone in an instant. Even with health insurance.

I had a heart attack in Jan of 2019. My wife drove me to the hospital (so I didn't have ambulance fees) but the emergency treatment + follow up visits still set me back over $10k out of pocket even though I have health insurance. And I feel like I got the absolute bare minimum in coverage - basically they checked to make sure I didn't have any long term damage and that I wasn't in immediate danger of dying, and I was discharged. The follow up visits were equally as brisk, they didn't even do a heart function test or really anything outside of a chest xray thing and took my vitals. No long term care or support, just a "hope we don't have to see you again!". For a long time while I was paying that debt off, I just kept thinking I would have been better off staying at home that night and weathering the storm. If there's a next time, I probably will.

That's the pros and con of US taxes and healthcare.

In the US, taxes are generally lower, so assuming someone has a decent job, they should be able to bank more savings to cover things like this. That assumes the person doesn't blow it on credit card shit. And if you never have to dole out big healthcare costs, then you bank it in full.

In other countries, our taxes are higher.... provincial goods tax (Ontario is 13%), smokes and gas cost a lot more, income tax is higher, capital gains taxes is higher, we cant deduct mortgage interest etc.... We lose a lot more on every dollar we earn.

But in return we get a lot of healthcare covered. So doctors visits, hospital stays, you need to do an Xray, surgery etc.... are all covered. But not everything is. Depends on the country. For example in Canada, unless you are dead broke on gov assistance or it was deemed excessive like you got in a car accident, things like eyecare and dental care are covered by you or your employer benefits - not government. And prescription drugs same thing unless it was administered at a hospital. And nitpicky shit like crutches, paramedic fees, and even parking at a hospital costs money.

 

[ResurrectedContrarian]

jshackles

Understandable. I'm also the sole income for my family of 4, and despite making well north of that 100k mark and living in a rural place, we still struggle to catch up. Everything is expensive... gas prices alone are killing us lately given that driving into town for anything takes a minimum of 30 minutes, even for milk.